Business 101 - Startup Pitfalls

Each week thousands of Americans make the decision to start their own business. By choosing to launch your empire from home, you eliminate costly overhead for the outside space and you can test the waters of having a business on a part-time basis, before taking the full-time plunge. Consider these 101 questions and answers to help avoid some of the pitfalls associated with new business startups.

1. How do I know if I have a good idea for a business?
The Small Business Administration (SBA) has put together 3 criteria for a successful business. You should be able to answer "yes" to at least one of the following: Does the product/service business serve a presently unserved need? Does the product/service serve an existing market in which demand exceeds supply? Can the product/service successfully compete with existing businesses catering to the same market niche?

2. Should I write a business plan?
A business plan helps one to organize all aspects of running the venture. It will help you answer all of the questions you need to in order to start your business with confidence.

The business plan should contain: a summary of what your business is; a brief outline on how you plan to sell this product or service; an overview on who your customer is; a budget; a financing plan; a strategy for getting publicity and generating interest in your product or service.

3. Will I need a lot of money?
The start-up capital you'll need will vary depending on what type of business you are starting. However, you should: figure out what it costs to make your product or offer your service, and then set a price. Once a price is set, determine how many units/clients you'll need each month to survive. Your monthly income should, of course, be greater than your expenses.

If your business is seasonal--firewood delivery, for example--figure out how much you need to make during your high season to sustain you through the dry months.

4. How will I know if my business is successful?
Success is rated in many ways. Picasso said that if one could see no line of demarcation between work and play, they had achieved success. Some measure success in terms of money, others in freedom and flexibility. It's up to you.

5. Do I have to dress for work even if no one will see me?
Many home-based entrepreneurs tell us that it helps to get dressed in the morning as though you are going to an office job, just so you feel more disciplined. We, however, go for the home-based blue jeans and t-shirt look, preferring to dress only for meetings with clients. After all, haven't you worked all your life "dressed" for work?

6. Should I work normal 9 to 5 hours?
The beauty of being your own boss is that you can now work from 9 p.m. to 5 a.m. if you so desire. Obviously, you will need to be in operational mode when your customers are working so you can contact them. If you work on an engraving business, however, you can work on your projects at any hour of the day or night.

7. I'm easily distracted. Can I still work at home?
You'll have to muster up discipline to stay away from the refrigerator, the television, the pool or the nearby, the television, Court TV or the nearby shopping mall. If you have children, try and find someone who can watch them for a few hours a day so you can get some work done.

8. How can I achieve this level of discipline?
Focus. Focus. Focus. You must be disciplined enough to create your business and follow-through. This is the ultimate test for an entrepreneur. If you can't get focused and carry through, then you might be better off working for the other guy, and leaving it all behind you when the 5 o'clock whistle blows.

9. How should I pick a business?
Choose something you enjoy and then figure out how you can get paid for doing it. Pick a business you'll like, be cause you could be at it 24 hours a day. Make a list of your hobbies. Is there anything there that could be turned into a business?

10. Are there types of businesses that I can't run from home?
Yes, you'll have to get into a discussion with your local zoning commission, but you can't run a restaurant from most homes. There are many businesses, such as used car lot, quick lube service, that can't be run from home.

11. How do I find out about zoning?
Go to your local town hall, zoning office or even the local library. Ask for a copy of the zoning laws. In many areas, the communities have not yet updated their zoning laws. If you read that you can't do something in particular that you have in mind, don't worry--make a few calls to the zoning committee and find out if they have expanded their interpretation of the law.

12. What if I don't meet zoning regulations?
Call an attorney (specifically, one who deals with zoning) and inquire about the specifics of the law. He or she might have a way you can get around the regulation. You can also contact the zoning board in your community and ask them to make an exception by applying for a "variance." A variance waives the law. Another option is to conform to the law by changing your operation. For example, if you want to open a cafe and serve coffee and gourmet treats, and it's not permitted, could you alter your focus and open up a catering operation?

13. What about licenses and other regulations?
Many people start businesses without investigating what local, state or Federal laws exist concerning their home-based venture. It seems that many coast by for years without being discovered by the Internal Revenue Service (IRS) or other government offices, but once they do, they can levy heavy fines and penalties. It's best to get it right from the start. Make a call to your county clerk's office. That will clue you in as to the various licenses and forms you need to acquire or to file.

14. Do I need to open a separate bank account?
Whether or no you operate the business under your own name, you should consider opening a separate bank account for your venture. If you are planning on conducting business under a name other than your own, you will need a bank account in the name of the business so that you can cash checks that are made out to "Best Bet Catering" or "Quick & Easy Mobile Detailing."

To do this, check with your county clerk. You'll need to pick up three "Doing Business As" forms from a local stationery store. The forms cost about $1. Fill them out, have them notarized, then take them down to the county clerk's office. The county clerk will keep one copy, you keep another and take the third to the bank where you want your bank account set-up. You will also need to obtain and Employer Identification Number from the IRS. This is sort of like a social security number for your new business. Different businesses need different types of licenses. Catering requires, at the minimum, a food handler's license. The county clerk or the local SBA office can help point you in the right direction. Make a call to the IRS office in your region and ask them to send you an information package on tax filing for your small business. You might want to secure the services of an accountant who will help you do your taxes. It's a great investment for any small business owner.

15. Do I have to incorporate?
No, you do not. There are other, easier, options. Sole-proprietorship is one method, and if you have a partner, then you might want to consider forming a partnership as your legal structure. For specifics, consult an attorney or call your local SBA office for more info.

16. What are the advantages of incorporating?
The main advantage is that you will have limited liability.

17. What are the disadvantages?
You will have to figure on spending more time and money filing licenses, taxes, etc. as a "corporation." There are other forms of the corporation, such as a Sub-S Corporation that you might also want to consider.

18. How do I set up a corporation or a Sub-S Corporation?
This offers you the limited liability option of a corporation along with permitting all of the income from the business to go to you directly as an individual as though you were running either a "sole proprietorship" or a "partnership."

19. How do I set up a corporation or a Sub-S Corporation?
Early on in your new business venture, it's alwasy a good idea to spend a few cnsulting hours with an attorney who specializes in small business. He or she can spell out all of the legalities and point out plenty of other helpful advice. You do not need an attorney to set up a corporation, but they can help you cut through a lot of the red tape--for a fee, of course.

20. What is a sole proprietorship?
This is the easiest way to get your business venture rolling--and the cheapest. Basically, this form of doing business can be organized very quickly. You just begin. You should call the local county clerk and determine whether or not you need certain business licenses and/or permits to proceed.

21. What are the disadvantages of a sole proprietorship?
In setting up this type of business, you will be liable for everything in respect to financial and legal obligations. For example, if you can't pay the bills, the creditors can go after your car or house or van. If a customer falls on your front porch, he or she can sue you and you could lose everything. It is still the most popular business form chosen by entrepreneurs.

22. What is a partnership?
A partnership is a group of more than one individual. It costs more to set up than a sole proprietorship but costs less money than it does to set up a corporation.

23. What are the disadvantages of a partnership?
Make sure you like working with all of your partners because it won't be easy to alter the agreement. All partners are responsible for honoring debts of the partnership, so if one partner slacks off, the others must come up with the money for his or her share. If one partner goes under, he or she could drag down the others.

24. Are there any advantages to a partnership?
In many cases, entrepreneurs enjoy the camraderie of dealing with a group of people. They are used to dealing with a group from their working days, and find it bolsters confidence to go after a goal with a small group of individuals.

25. What do I do about taxes?
The IRS is getting tough and is really cracking down on home offices. You must use your home-based business space exclusively and regularly for your business venture. It can be a separate structure or a room in your home but it must be the principal place of business, and it must be where you regularly meet clients.

26. What if I store stuff in a storage space. Can I deduct that expense?
You must use the storage space exclusively for storing goods related to your small business. The storage space must be used regularly.

27. How much can I deduct?
If you live in a 1500-square foot home and your home office takes up 150 square feet of space then the home-based business enterprise space comprises 10% of all expenses which are generated by the entire home. For example, you can deduct 10% of water costs, garbage collection, phone, heat/utilities, etc.

28. What about sales tax?
In the old days 9prior to the Tax Reform Act of 1986) a small business owner could deduct sales tax as an itemized deduction. This is no longer possible. The sales tax can be included as part of the original cost of an asset which may be depreciated for business use. It's a good idea to round-up an accountant when starting any type of new business. You won't have to keep them on some heavy-duty retainer, but can pay them on an hourly basis. With the hassle of changing laws and taxes, it's a very good idea to work with a pro who understands all of the tax laws changes on an up-to-the-minute basis.

29. How do I go about setting up a bookkeeping system?
It's a good idea to investigate local classes at adult education or even a seminar with the SBA on bookkeeping or in setting up a very basic accounting system. Even if you have the money to hire an accountant, you should get a grip on your business' financail affairs. You should be able to explain to yourself how much money you owe out to others, how much others owe you and how much cash you have on hand.

30. What types of records do I need to keep?
You'll need a check register (to record all of the checks you write); a cash receipt system (to list the amount of cash you received, on what date, and from whom); a record of bills (to know what bills you owe, to whom and the amount owed); journal (to keep a daily agenda of everything you do, everything that relates to the business, everything you sell)--a journal is a great system to start and maintain no matter how big your business gets.

31. How can I make it easier to handle?
You could investigate the wide variety of software systems that are on the market. Many deal strictly with setting up and handling an accounting system.

32. Why do I need to do this if I hire an accountant?
You will need tools to turn over to the accountant. You can't walk in with a bag full of receipts. The more organized you are, the more organized you will be when presenting this material to an accountant. That translates to reduced bills from the accountant. You'll save time and money and be more confident about your venture.

33. Do I need any special insurance?
There are many different types of insurance available to home-based business people. You should sit down with the agent who works for your insurance company that insures your home and figure out what types of additional coverage you'll need.

34. What is the minimum coverage that I'll need?
You should make sure you have fire, liability insurance, automoblile insurance and theft insurance.

35. What if I have one or two employees?
If you hire some employees, you'll need to get Workman's Compensation insurance. This type of insurance varies from state to state. Your insurance agent can help you research the requirements in your particular state.

36. What other types of insurance should I explore, such as business interruption insurance?
Business interruption insurance will cover any of your expenses while your business is shut down due to a power failure, a fire or any other predicament. This insurance will pay your taxes, your utility bills, taxes, and salary to any employees.

37. What is crime insurance?
This will cover you in the event of a robbery or a burglary. It also covers thefts by employees.

38. Can I get liability insurance for the product I manufacture or for the service I offer?
yes, you can. If you are in the business of manufacturing products, you'll want to investigate insurance that will limit or free you from liability of defective goods. If you are offering a service, you'll want to look into "errors and omissions" insurance, which will protect you should something go wrong with the service you offered.

39. What should I know when I go to pick out and buy a computer--I'm a novice?
Bring this checklist along: Is the salesperson and the store trustworthy and reputable? Will they train you? Can you understand the basics of the unit they are showing you? Does it come with software that teaches you at home how to use the computer? Can you phone in questions to the shop or to the manufacturer? Does it have enough memory for all you need to store? Do you like the way the type appears on the monitor? Is the keyboard easy to work? If you don't needa laser printer, don't buy one. Get a less expensive inkjet printer from Hewlett Packard.

40. Where can I find out about inexpensive software programs?
Go to your local software store and peruse the shelves. Also, talk to other small business owners and pick up a few magazines on software options.

41. What type of checking account should I open?
You should open a separate business account. This will be required if your business operates under a nmae other than your own. When you visit the bank, ask them the following: Is a minimum required to open an account? Are there hefty stop-payment fees on checks? How much do they charge for checks that bounce? Does the bank offer overdraft protection? Are service fees charged? Is there a fee on different transactions? Is overdraft protection offered?

42. What is a fax machine?
a fax or facsimile machine enables you to electronically transmit a document over a phone line to another fax machine. The document is printed in exactly the same form on the receiving fax machine, as though it had been photocopied in the transmission process. it takes about 15 seconds to fax one page and costs about 15 cents. It is cheaper to use than a stamp or to place a long-distance call.

43. I plan to recycle my old newspapers. How do I do this?
Check the Yellow Pages under "Recycling" to learn more about what types of paper different companies accept and how much they pay for it.

44. What types of things can I buy that are made from recycled paper?
Here's a partial list: computer paper, copy and typing paper, toilet tissue, paper towels, storage boxes, pads, file folders and stationery.

45. How should I choose a name for my business?
Make sure you choose a name that will work tomorrow as well as work today. If you are making pot holders don't choose Tom and Sally's Pot Holder Shop because in a year or two you could expand to Aprons. Try Tom & Sally's Kitchen Shop or Tom and Sally's Household Goods. Keep it open and flexible.

46. I've found a name but need a logo for my business card. I can't afford a designer. What should I do?
There must be dozens of artists in your community or students at a local arts or graphics design school that would love to design your logo. We know of one entrepreneur who paid $35 for a design from a local student. The student benefited, too. He got to put the piece of work in his portfolio.

47. I'm interested in exporting my product to other countries. How can I find out about how to do this?
There are numerous books out on the topic so check your library and local bookstores. Also contact the U.S. Department of Commerce at 202-637-3077 or write to their Export Now office at Room 5835, Department of Commerce, Washington, DC 20230.

48. How do I investigate getting an 800-number?
A lot of people don't realize that it can cost under $100 a month to get an 800-number. Call AT&T, Sprint and MCI and ask about their 800-number programs. Also ask about other programs they have for small business owners.

49. Can I hang a sign on my house?
In some towns you will be permitted to hand a sign no larger than 9 by 12 inches and it must go in your window. Other communities will permit a yard sign. In some areas, signs are prohibited. Check with the local zoning office.

50. How should I choose a supplier?
Suppose you are making a list of folks you'll need to purchase office supplies from or even balloons for your gift baskey business. Spend some time on the phone with these people and see if you get along both professionally (if you like their attitude) and personally (if you like their manner on the phone). This will help you to feel good an positive about doing business with them. Call or stop in and visit a few suppliers before making any decisions. You might also want to try a few out and see who you like best, so don't sign any contracts with time constraints.

51.Most people say that businesses fail because they lack sufficient funds. True or false?
True, most businesses do fail because they lack enough money to keep the business up and running until the profits start rolling in. You should have enough money to sustain the business for at least 6 months.

52. What can I do to ensure that I have sufficient funding?
Prepare a detailed budget, develop a great relationship with a bank, develop superlative customer service techniques so that your clients keep coming back for more, and remember to always pay your bills on time so that you won't start a money feud with your suppliers.

53. Where should I set up my home office?
The best case scenario would be to maintain a distinct line between your living space and your home office. For many, home-based entrepreneurs, however, this is just not possible. Consider the mail order maven who has inventory all over the house, or the computer pro who starts a word processing business that suddenly flourishes. There are bound to be stacks of documents, labels and envelopes for clients all over the house. You should consider an attic, basement, a spare room or a corner of the garage. If you are having construction done consider adding on a small spare room to serve as your home office. It would make a great home office--no matter how small.

54. Do I need to invest in furniture?
This is up to you. Maybe you have the makings of an office right in your home. A spare chair from the den, a desk from one of the kid's old rooms, a table from the basement that will hold up the computer and the printer. You don't need to invest a fortune.

55. What about stationery?
We recommend that all home-based entrepreneurs spend a little money on creating a stationery system that will consist of the following: letterhead which states name, address, and phone/fax number; envelopes with name, address; business cards. Creating a nice looking stationery system is even more important for home-based biz owners who will likely never have their clients in their home. They sell their business with their image. Good looking goods can give a sophisticated image even if you work from your crowded kitchen table.

56. Do I need a separate telephone line?
We think it would be better for you to have a separate line. There's nothing as unprofessional as having a small child answer the phone and say, "I'll get Dada or Mama." If you are trying to give the illusion that you have a rock solid, professional venture going, then get a separate phone line that only you or an answering machine or voice mail will answer.

57. Do I need to buy a photo copier machine and fax and all of that stuff to start?
Not to start, but you could find it handy after you make many trips to your local copy center to handle your tasks. You might consider looking into a combo machine. One that faxes, copies and acts as a printer. There are many on the market starting at about $700.

58. How do I learn to stay focused in my office and not get distracted by the TV or the backyard garden work that needs to be done?
Remember, we said it before--focus. Learn to set goals. Start. Don't keep putting projects off because they seem too overwhelming. Start small and stick with it. If you enjoy a cup of coffee, use it as a reward. Make all 20 phone calls first, or write those 5 letters, or type up that budget or proposal first and then go make that pot of coffee.

59. Should I join the Chamber of Commerce?
You should most definitely tie-in with every organization in your area. You'll build word-of-mouth about your business, and might pick up a few clients. Attend town meetings, join civic groups, get involved in your community and always mention what you do.

60. Should I advertise?
If you can afford a budget for advertising, then do so. Place ads in your local newspaper. Then consider regional magazines. Go to where your customers are. If they buy a certain publication, call the advertising department and ask them to send you a media kit. Study the ad rates and see what you can pull off. One ad might cost $1000, but it could generate thousands of dollars in business.

Consider special advertising sections in your local newspapers as well. Call them for a list of these special sections. If you run a bridal consulting service, for example, you should consider placing an ad in they special bridal section (that probably goes on sale in April or May).

61. Can't I get some promotion without paying for it?
Yes, if you become a master of public relations and publicity. There are dozens of ways to generate interest in your business. Write a press release on your business and send it to the media, stage an event, alert local TV, put up a sign, offer a discount, get yourself interviewed on a local talk show as an expert in your field. Yes, it's free!

62. Is customer service really important?
By all means, one customer that keeps coming back is worth a lot! They, in turn, tell their friends about you and so on and so on down the line. Before you know it, you have all the work you can handle just from good hype. The customer is always right.

63. Where can I get free or low-cost information on running a home-based business?
The SBA publishes a directory of more than 100 publications on a variety of topics of interest to entrepreneurs. Contact your local SBA office to receive a list of the publications.

64. How can I buy goods for my business at wholesale prices?
You will need a re-sell number or a Sales Tax Number. Call the state's department of revenue for a sales tax or tax exemption number (also known by other names depending on what state you live in). You'll be issued a number that permits you to enter trade associations and conventions in which wholesalers show their wares. You will also be able to go into wholesale shops and pay no tax. Most bnusinesses will keep your sales tax number on file, but keep it handy just in case they ask to see your documentation again. The reason you are tax exempt is due to the fact that you will be collecting tax when you sell these items to your clients.

65. How can I sell my mail order goods to catalogs?
Contact the catalog houses you are interested in selling to and send them a one page fact sheet along with a photo or a sample of what you have to offer. Follow-up with a phone call in about 10 days.

66. What if I accept a check and it bounces?
Wait a few days and try submitting it to the bank for a second time. If it still bounces, you can either contact the individual and aks that the bill be paid in cash, or you can go to the local district attorney's office. You can also get help from the bank. For a small fee, the bank that issued the check will hold it and cash it as soon as any money is deposited into the account. The check will be returned to you if nothing is deposited in one month.

67. What about a collection agency?
A collection agency's goal is to collect unpaid bills for a fee. That fee is based on a percentage of the unpaid bill and how much work it takes to retrieve the money. You can find a collection agency by thumbing through the Yellow Pages.

68. Could I go to court?
Small claims court handles cases up to $2000--and amounts do vary from state to state. Call your county clerk's office to find out if they system might work in your case. It is often satisfying to know that you persued every opportunity available to you.

69. What is the "break even point" and how do I calculate it?
The break even point is reached when your expenses balances with your earnings. You are still, however, not making a profit. When you reach the break even point you are ready to "make it or break it"--make a profit or rack up a loss.

70. I have a great idea for a new business but I'm afraid to talk to anyone about it because they might steal the idea. Who can I turn to at this juncture?
Call your local SBA office and ask to be put in touch with a SCORE office (Senior Corps of Retired Executives) nearest you. There are 750 offices in which experts in a wide range of fields consult with newcomers on how to set up and run a business. Even Ben & Jerry, the ice cream kings, turned to a SCORE office for assistance when they started their first ice cream shop. To reach SCORE call your local SBA office or dial 800-ASK-SBA.

71. I'm retired and want to start a business, but not from scratch. What options do I have?
You can look into a franchise operation in which you are purchasing the rights to a proven system of doing business, or you can scan the Business Opportunity section of your local newspaper and think about purchasing an existing business.

72. What is venture capital?
Venture capital is a privately owned investment group that looks for on the go business ideas in which to invest. In exchange, they want up to 30% of the profits and a lot of say in how things will work and are conceptualized within the small business.

73. My nephew wants me to start a business with him. How do I know if we can make it work?
If you're referring to personality conflicts that could arise you should sit down and discuss all aspects of the planned venture, from the name of the business to your responsibilities, as well as goals of the venture. What are your work habits? Are they similar? Are you detail oriented while he is not? Will you be expected to bail out the business financially if something goes wrong? A partnership is just like a marriage, and can be even harder to dissolve so approach any business relationship with caution. You might be better off on your own.

74. How do I generate business for my new enterprise?
f you can't afford to place a classified ad in your local paper, go the poster and flyer route. Hang them up on local bulletin boards and put them on cars, give them out in congested areas such as parking lots. Make sure you include your phone number, address and some information about the service you offer or the product you sell.

75. What about direct mail?
Direct mail is where you create a brochure or a flyer and send it out to prospective customers that are already predisposed to buying your product/service. For example, if you are starting a lawn care service, don't mail the flyer to folks who live in an apartment building or to those who live in a co-op/condo complex who have this service included in their maintenance.

76. I'm researching a few business ideas. Where can I get statistics and market information for my business plan?
The following should be of help: local library, Chamber of Commerce, state department of economic development, trade associations in that field, bookstore, magazines.

77. What exactly is the definition of a small business?
Less than 100 employees with sales of less than $5 million.

78. What are some of the things I should include in my start-up budget?
In addition to inventory and basic investment on your product/service, consider and factor in the following expenses to help you determine a budget: taxes, insurance, utilities, advertising, rent/mortgage, living costs, transportation.

79. I make a product out of my home. Where can I sell it if I can't afford national TV advertising or national magazine ads?
Consider going the trade show, craft fair or association route. Get yourself a booth at a trade show, sit there with your products on display and wait for buyers to come up to your table and order your goods. Here are just a few excellent selling venues: conventions, auctions, block parties, flea markets, craft fairs, swap meets, shopping malls, school functions, fundraisers, state and county fairs, church events, civic events.

80. Where can I find out where these shows are held?
Contact local convention centers in your region and get a schedule of events. Call associations you are interested in and find out when and where they plan to host their shows. Many libraries keep a copy of Directory Of Associations on hand.

81. What does it cost to rent booth or table space at a show?
A local swap meet could cost $10 a day and you might have to turn over a small percentage of your profits to the organizer. Porfessional trade shows could cost anywhere from $500 to $2000 for a booth. BUT, it could be a good gamble. We know of one entrepreneur who begged and borrowed the $500 he needed to get a booth and wrote up $14,000 of orders in one weekend.

82. I make and sell clothes. Where can I get labels printed?
Check your local Yellow Pages under garment center, labels and/or custom-made goods.

83. How do I organize a home office?
An important thing to have is a filing cabinet. No matter what you think, you will need to turn to research materials, client lists, flyers, etc. Start a good filing system from day one and you won't be overwhelmed six months down the line when you try to organize the mounds of paperwork you've accumulated.

84. Can a home business really make it big?
Absolutely! Consider this list of enterprises that started fromn home: Apple Computers, Ben & Jerry's Ice Cream, Domino's Pizza, Ford Motor Company, Estee Lauder, Lillian Vernon Mail Order, Reader's Digest, Nike, Walt Disney, Hallmark Greeting Cards.

85. I don't have enough money to print up a brochure for my business. What else can I do?
We've covered flyers, but don't underestimate the power of a great letter. Don't make any claims you can't back up, but do outline all of the positive aspects of the product or service you are offering.

86. Is there a national group of home-based entrepreneurs that I can join?
Call the National Association For The Self-Employed. Based in Hurst, Texas, the NASE began in 1981 and has grown to a membership in excess of 300,000+ small business owners, many of whom work from home. The organization prides itself in serving the needs of small businesses: the mom-and-pop shoe store, the one-person show, the solo entrepreneur just starting out. Call or write for details: NASE, 2121 Precinct Line Road, Hurst, Texas, 76054.

87. What are the hot trends in small business start-ups?
Service businesses definitely are booming. Food delivery is very big, mobile car wash and detailing, recycling and other businesses, that related to the environment, health-care services and residential/commercial cleaning all seem to be doing very well. Gift basket businesses don't seem to have slowed down and mail order continues to grow.

88. How can I learn about all the various legal forms I need to start and run a small business?
Consult with your local SBA office. Also, drop by a local stationery store. They sell the forms. A local bookstore could point you in the direction of a book of forms, too.

89. What about a home office?
I work in an office, but often do a lot of work out of my home? In 1991, the IRS introduced Form 8829, which taxpayers must use to claim a home office deduction. The form asks each home worker to calculate the percentage of the home used for business, based on either the number of rooms or the square feet. Others costs such as insurance, itilities and depreciation on your home, must be included in your calculations for the Form 8829. To qualify for the deduction, a portion of the home must be used as the main place of a business. It has to be usedas a main place of a business. It has to be used on a regular basis and it must be used exclusively for that business. If you file, you must be able to prove this. The business that is exempt from this exclusivity is a day-care business.

90. What is the difference between the service, retail and manufacturing sectors?
These three headings are used to categorize business in the United States. All businesses fall into one of these three. Service is selling time and convenience to busy Americans and can range from a car wash to a catering enterprise. A retail business involves a store or selling of merchandise. Manufacturing is our auto industry, or the making of widgets for a giant corporation's assembly line.

91. What's the best way to approach any type of agreement with a supplier, customer, etc.?
Put it in writing. When it comes to money, a written agreement will spell out the responsibilities, deadlines, prices and anything else that pertains to the matter at hand.

92. How do I investigate or judge the legitimacy of a company offering a new business opportunity?
Here are a few guidelines: beware of companies that request money right away, even before they adequately explain what their biz opp consists of; make sure the company has a number, address you can use to follow-up on their sales literature; call the Better Business Bureau in the city which the company is based and request a "reliability report"--they might charge you for this service, but it is worth it. The cost is about $3. Check with the consumer affiars office and call the post office where the company is based and see if there are any complaints on file concerning mail fraud.

93. How do I charge sales tax?
Just about every state charges sales tax. A business owner needs a "seller's permit" in order to collect sales tax. You can get this permit from your local state sales tax agency. You must make a deposit or post a bond which the state will keep if you fial to pay the taxes you collect. You might want to predict low sales for your business when you go to apply for the permit. This could reduce your deposit fee. You must file monthly or quarterly sales tax returns with the state agency. Who needs to charge sales tax? Anyone who sells an item on a retail basis directly to the consumer.

94. I'm starting a sports collectibles business. Can I have people buy the goods right out of my house?
You'll have to check local zoning laws on using your home as a shop. Your nieghbors might object to cars parked on the street.

95. I have a lot of computer equipment at home. How can I discourage a break in?
Leave a light on or set a light on a timer. Put a few in different rooms. Illuminate the outside of your home. Connect a radio to the timers. Don't inform the police that you'll be away. They are not the best deterrent from robberies. Tell a trusted friend, neighbor or relative. Ask them to pick up your mail (and water your plants).

96.What types of documents should I save?
Save the following: cancelled checks, deposit slips, purchase invoices, sales slips, invoices (copies), receiving reports, receipts for cash paid out, any type of record or receipt that backs up knowledge about your business recordkeeping systems. Also, save all of your tax returns.

97. What is a balance sheet?
A balance sheet tells you at any time what your business is worth. It includes liabilities (what you owe); assets (total value of your business); and capital (claim on the assets of the business). Your balance sheet basically looks like this:
liability + assets = capital.

98. I need to hire someone to help me out during the busy seasons. Any suggestions?
Maybe you should call a local temp agency in your area. You might not need to hire a full-time employee. Also consider part-time help from students or out-of-work folk or retired people.

99. I've never run a small business and have no formal training. Am I crazy to try?
Everybody has to start somewhere. There are no written scripts on what it takes to lauch a winning venture. If you choose a business you'll like, you will enjoy working on it, and if you work on it, chances are in your favor that you will succeed.

100.I have a small child who wants to work in my business. How will this work tax-wise?
A child with no other income can earn uyp to $3000 tax free. If your business is unincorporated, your child's wages will be exempt from Social Security and unemployment taxes (until they reach 18 years of age).

101. How can I teach my spouse about my business without sounding bossy, pretentious, obnoxious?
Have your spouse work in your small business for 2-4 weeks a year. If for some reason, you get sick, he or she can step in and keep the ball rolling until you return to the line of fire.
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